Insurance Problems, Flood Insurance Problems, CLUE report

Pop quiz, do you know what C.L.U.E. stands for?

(See the answer at the bottom of this article.)

p.s. If you do not know what a C.L.U.E. report means in general and you practice real estate, you are already at risk for a lawsuit.

[Contact asap your BIC, your law firm, your E&O insurer, the SCR legal hotline, and the SCR legal action committee if you get sued.]

Imagine: You are a buyer and you close on your dream home. Then, something bad happens. A hail storm damages your roof system. A flood inundates your home. You think, no problem! I have homeowners insurance! I have flood insurance!

But, there is a problem.

Imagine: The seller and or previous owners did not disclose that they had made multiple home insurance claims/inquiries, multiple flood insurance claims/inquiries, and previously received insurance money to replace the roof from a previous hail storm.

Imagine: The seller and or previous owner pocketed the insurance money for the new roof and then never replaced the roof as the seller should have done.

Insurance companies created a C.L.U.E. database where they all share input on claims and output on insurance payouts and information on insured persons/companies.

So, the new insurance companies know from C.L.U.E. what the seller and previous owners claimed and how much money the sellers and previous owners received for the past seven years with their old insurance companies via the C.L.U.E. database.

So, the new insurance companies might not pay the claim.

Or, the new insurance companies might pay the claim then significantly raise the insurance premiums.

Or, it may become difficult to obtain insurance coverage.

How can a buyer and REALTOR® and brokerage protect themselves from the seller and or previous owners who used insurance correctly and incorrectly?

Require the seller to order and provide a C.L.U.E. report and FEMA flood history report as an attachment to their seller disclosure. [Note:  only the owner can order the C.L.U.E. report on the Property and the FEMA flood history report on the Property due to privacy laws.]

If there are multiple claims on these two reports, consult with legal counsel and insurance counsel for potential issues in the future such as denied claims and significant increases in premiums and difficulty obtaining insurance.

Here is a link to ordering the C.L.U.E. report:

https://personalreports.lexisnexis.com/fact_act_disclosure.jsp

Consider adding this to the SCR310 contract [due diligence gives the buyer a timely/proper way out of the contract if the C.L.U.E. report and FEMA flood report reveal troubling information.]

"This SCR310 Contract is contingent upon the Seller ordering and paying for and providing to Buyers no later than 72 hours prior to the end of the SCR310 Due Diligence Period both a current and proper C.L.U.E. report on the Property/Owner and a current and proper FEMA flood claim history report on the Property/Owner as a listed attachment to a current and proper SC Residential Property Condition Disclosure Statement (RPCDS) and Owners Association Addendum where all questions are properly/honestly answered YES only or NO only with written explanations included in the RPCDS for any YES answer and no answers left blank and no questions answered NO REPRESENTATION."

REALTORS® and buyers should always get the seller to complete a seller disclosure which has insurance and flood-related and damage related questions.

Even if a seller is "exempt" from the seller disclosure, the buyer can always checkbox the first box in Section of the SCR310 residential contract so the seller becomes contractually liable to provide a seller disclosure.

The seller disclosure enables the buyer’s attorney to sue the seller for false answer damages and the buyer’s attorney fees. The attorney fees provide leverage for self-settlement or mediator assisted self-settlement.

Use due diligence so the buyer can investigate all property issues and have an easy way to timely/properly terminate the contract if issues are detected.

Always have buyers investigate flood insurance and sign the SCR233 Flood Insurance Disclosure.

https://screaltors.org/wp-content/uploads/Forms/233.pdf

Answer to the pop quiz: Comprehensive Loss Underwriting Exchange (C.L.U.E.)

Other issues reported to SCR recently on insurance issues include roof issues, so check on the roof and roof warranty and roof warranty transfer procedures if available.

This information is only accurate as of 07/10/24. You must contact SCR for updates and changes to this information after 07/10/24 as laws and regulations may change over time. SCR 803-772-5206 or email info at screaltors.org or email byron at screaltors.org)

This information is not legal advice. This information is intended only to provide general information and may not be relied upon as specific legal guidance. Legal counsel should always be consulted before acting in reliance on this information.